Every year, companies are forced to pay billions of dollars in fines related to common HR compliance rules set forth by the government. As an example, the U.S. Equal Employment Opportunity Commission revealed that in 2010, “it secured more than $404 million in monetary benefits for individuals.” And that’s only with regard to discrimination.
The reality is, it can be hard to keep track of each and every instance where compliance could be an issue. There's a huge variety of fines businesses large and small can incur. And for small businesses, those fines can add up quickly.
We've outlined some common compliance fines that can occur around human resources.
(Psst... We've built a complete how-to guide on staying compliant when hiring employees.
Update: Outsourcing your HR is one way to avoid costly compliance costs. We've written a guide to help you weigh the options between in-house HR and outsourcing. You can download it for free here.
Common HR Compliance Fines
Equal Pay Act
You are mandated to pay your male and female employees exactly the same if they are performing jobs that have the exact same skills, effort, and responsibility. In other words, you can’t pay men more than women or vice versa. Should you do this, you could be liable for a salary increase, back pay, court costs, and attorneys’ fees.
Should you do HR in-house or outsource it instead? This guide helps you ask the right questions.
This form is what is required for any new employee to prove that they are allowed to work in the United States. The fines for failing to comply with the requirements set forth by the I-9 can result in fines of $110 to $1,100. Should you continue to employ someone knowing they cannot work in the United States, you may be required to pay a fine of $375 to $3,200 per worker. And the I-9 fines can accrue as you break the rules repeatedly. We've written more on exactly what the I-9 requires here.
Affordable Care ActThere are two common penalties around the Affordable Care Act for small businesses: $3,000 per employee for not offering affordable coverage and $2,000 per employee for not offering healthcare at all. There are a further 12 regulations that each carry a $100-per-day penalty for non-compliance. These fines can add up to $500,000 in penalties.
Americans with Disabilities Act
When it comes to having employees that have disabilities are potentially hiring employees, you have to ensure you don’t break any of the rules here. Specifically, there can be no discrimination when it comes to hiring and any physical barriers that interfere in that individual from working must be removed. The Department of Justice can file a lawsuit and it may also obtain civil penalties. For first time offenders, that can be $55,000. For repeat offenders, it can be $110,000 per violation.
For employers with more than 20 employees, they are mandated to offer COBRA for employees who have been let go and their dependents. The tax penalty is $100 per qualified beneficiary, up to $200 per family. If it was an unintentional violation, the maximum penalty is the lesser of $500,000 or 10% of the amount the employer incurred for group health care in the previous year. Therefore, if the company only paid $4 million in group health care, it would only have to pay a maximum of $400,000.
Employee Polygraph Protection Act
You cannot polygraph your employees or prospective employees. There can be a penalty of up to $10,000 per violation.
Fair Labor Standards Act (FLSA)
This is the law that established minimum wage, overtime pay, child labor standards, and recordkeeping. Should you violate this, you are required to pay back pay plus a potential $1,100 per violation. If you break the child labor violation, you are subject to a penalty of $11,000 and $50,000 if it resulted in the death of a minor.
Avoid the Common HR Compliance Fines
Compliance is an expensive business. Companies spend thousands to ensure that they are following all the rules set forth by the government. Your human resources department should know a lot of these rules and do things to ensure that your business is operating as smoothly as possible.
However, what if you can’t afford to hire a complete human resources department? You could use a Professional Employer Organization like Justworks to handle all of your compliance so that you can go back to operating your business. What happens is that your employees also become Justworks employees, giving us the ability to handle all of your compliance.
At the end of the day, the easiest way to avoid compliance fines is to work with an expert. Justworks is that expert.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.